Posted on: 27th Oct, 2006 02:13pm
If you buy property prior to marriage with a down payment from your own funds, but make payments with community funds during marriage, then your spouse will have community interest in the property. Community funds imply your spouse's money and yours as spent towards loan payment. The community interest is known as Moore Marsden interest, which is calculated using a formula known as Moore Marsden Rule.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
The Moore Marsden Rule also applies to cases involving separate commercial property and where parties refinance a separate residential mortgage during marriage. However, the Rule is applicable only in case of states where the community property division exists.
How to calculate Community property interest
Applying Moore Marsden Rule, the community property interest is calculated as:
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
CP = PPCP + (CP% x MApp)
Where,
CP: Community property interest
PPCP: Payments towards Principal from community property
CP%: Community property percentage = PPCP / Purchase Price
MApp: Appreciation during marriage
SP = DP + PPSP + Pre-MApp + (SP% x MApp)
Where, SP: Separate property
DP: Down payment on property
PPSP: Payments towards Principal from separate property
Pre-MApp: Pre-marriage appreciation
SP%: Separate property percentage = 100% - (PPCP / Purchase Price)
Let's take an example:
Kim purchased a $300,000 house in 1992 prior to her marriage. She made a down payment of $50,000 and borrowed $250,000. Kim paid down $20,000 in principal by 1997 when she married Dick. The fair market value of the house at the time of marriage in 1997 was $400,000.
During their marriage Kim and Dick paid 30,000 towards the principal from community property. When Kim and Dick separated in 2005, the fair market value of their home was $600,000.
Now, applying the formula given by Moore Marsden Rule,
Community property percentage (CP%) = $30,000/$300,000 = 10%
Separate property percentage for Kim = 100% - 10% = 90%
Community property interest = PPCP + (CP% x MApp)
= $30,000 + (10% x $200,000)
= $30,000 + $20,000
= $50,000
Since community interest is divided into half, therefore both Kim and Dick will get = ($50,000/2) = $25,000 each.
Kim's separate property interest = DP + PPSP + Pre-MApp + (SP% x MApp)
= $50,000 + $20,000 + $100,000 + (90% x 200,000)
= $170,000 + $180,000
= $350,000
On separation and divorce, Dick gets: $25,000 as community interest
And, Kim's community and separate property interests = $350,000 + $25,000 = $375,000
Principal balance of loan to be paid off by Kim = $250,000 - ($20,000 + $30,000) = $200,000
So, when a couple divorces in a community property state, the court will award half of community interest to each spouse and 100$ separate property to the spouse who bought the property with separate funds.
kindly anyone provide some information on how the Moore/Marsden interest is calculated.
Hi Lorna!
If your husband has not paid any portion of the mortgage, then he does not has any right to the property. Moreover as it is a timeshare property, the sharer has no claims to ownership of the property. I think it will be better if you consult an attorney who deals with this. He/she will be able to help you with the legal proceedings of the case.
If your husband has not paid any portion of the mortgage, then he does not has any right to the property. Moreover as it is a timeshare property, the sharer has no claims to ownership of the property. I think it will be better if you consult an attorney who deals with this. He/she will be able to help you with the legal proceedings of the case.
Hello I purchased a property for $500,000 and made a down payment of $350,000, then spent 150,000 on improvements. Five years later I married and the property became community, at that time the prenuptual allowed me $1,750,000, as my seperate property on any disolution. During the marriage we paid off from community funds the balance of the oustanding loan in the sum of $111,000. We believe the appraised value of the house will be $4,500,000, which my wife will keep.
My question is; on buying me out what would be net to me based on the above and my tax liability, thanks Rod
My question is; on buying me out what would be net to me based on the above and my tax liability, thanks Rod
Hi Rod !
Welcome to the Forums!
If your spouse is buying you out, then there will be no tax liability on your part.
Sussane
Welcome to the Forums!
If your spouse is buying you out, then there will be no tax liability on your part.
Sussane
Person buys home for 260K.... One year later marries me..... Refi's property several times but never adds me to the deed as I quit claim so she gets better rate on loans..... Community money pays mortgage for 7 years ..... Now divorcing. Do I get any interest in property or what??? Thanks and love your web site.
If you have quitclaimed the property to your spouse, then you will not get anything from the property. Moreover the property was purchased before marriage, so I don't think it will come under community property.
My home was worth $160,000 there was a $44,000 I owned. We refinanced and now the mortgage is for $200.00. It is probably worth $450, 000. What will my husband get he is being so nasty because he is in love with another women and I have two young children. Thank you if someone can help.
Hi monic!
What does your husband want you to do? Does he want you to quitclaim the property in his name or is the property is both of yours name? If will be better if you could give us some more details.
Thanks,
Jerry
What does your husband want you to do? Does he want you to quitclaim the property in his name or is the property is both of yours name? If will be better if you could give us some more details.
Thanks,
Jerry
hubby had condo before we married. Then after we married we lived there for 5 years both of us paid the mortgage. He had me sign an interspousal grant deed when we sold it and we used all its proceeds on our current home. Is current home with both our names on it considered 50-50 for community prop in CA?
Hi madonna!
I think both of you will have a 50-50 ownership in the property in CA. But to be on the safer side you should consult an attorney and check with him.
Thanks.
I think both of you will have a 50-50 ownership in the property in CA. But to be on the safer side you should consult an attorney and check with him.
Thanks.
My husband owned property before we were married. Our plan was to demolish the house (it wasn't liveable) and build a new duplex. After we married, we demolished the house, prepared the land and built the house, including new slab, plumbing, utilities, sewer...nothing was used from previous house, just the land. Will this be considered co-mingled? Am I just entitled to 1/2 equity of improvements? I live in Louisiana
Hi CajunQn!
If money from the community funds were used while demolishing or raising the house, then the property has now become co-mingled and you can get 1/2 equity of improvements. If the community funds were not used, then I don't think are entitled to get anything.
Thanks.
If money from the community funds were used while demolishing or raising the house, then the property has now become co-mingled and you can get 1/2 equity of improvements. If the community funds were not used, then I don't think are entitled to get anything.
Thanks.
Acutally, we obtained a loan 1 year before we were married and we BOTH paid on that. Demolition and new construction started 4 months after we were married. From what I have been reading, it appears that I am entitled to 1/2 of the equity increase. The old house/land was worth approx 75K-100k, with the addition of the new duplex, we are now valued at over 700K. My soon to be ex, doesn't think I am entitled to anything since it was his property before even though, we have always paid the loans 50/50.
Hi cajunqn!
If you have paid the loans and if you are living in a community property state, then I think you are entitled to get some portions of the equity. You should immediately take some legal help to decide what will be your next steps.
Thanks,
Jerry
If you have paid the loans and if you are living in a community property state, then I think you are entitled to get some portions of the equity. You should immediately take some legal help to decide what will be your next steps.
Thanks,
Jerry
Ok- I'm getting divorced and just got a huge shock on the settlement proposal. Please tell me she's wrong..
I became engaged in 1997 and we bought a house ($220k). My wife put down 22k for a down payment and we got a $198k loan.
In 1998 we got married.
In 2002 we refinanced the house and it appraised for $400k. The loan amount was paid down to $183,674 by that time and we added my name to the title. Originally we kept it off because my credit score would adversely affect our loan. By 2002 my credit score was in the 700's.
My wife's attorney is doing the following calculation:
$400,000 (refi apprasial)
-183,674 (which they say is my M/M amount)
________
$216,326 (she say's this is separate property amount), I think the marital community aquired a 9.63% of this amount.
In 2004 we sold the house for $520,000 a difference of $120k in appriciated value that each of us have a $60k interest in.
The same month we sold our house in 2004 we purchased our dream house for 760,000k.
In 2008 we sold the house for $779k and owed about $500k on the loan. After fee's the profit was 220k. I was thinking that amount would be split, but they're telling me I'm only entitled to $66,300.
Can this be??
If she put 22k down on our original house in 1997 and in 1998 we got married, and in 2004 we refinanced, isn't she only entitled to that amount which she solely contributed to? We both paid for the house and we both lived in it.
I have been reading Family Code 2640 and that appears to be what that section says. Please help!
There was also a section of the calculation, which was handwritten that said:
$216,326 (wife's s/p) minus my m/m amount (Oct 1998 thru Sept 2002)
half of the principal=15k divided by 2 = $7500 divided by $216,000=3.5%
at 3.5% the M/M amount =$6,300
House sold in 8/04 for $520,000 = 120,000 divided by 2= 60k
$216k minus 60k = 210k plus her 60k = $270k
We were married for 9 years and lived in our original house for 1 year before marriage. in that time period we both paid for the house and general expenses. In California, is this how the split is done or is she only entitled to her original down payment of 22k as family code 2640 implies.
I became engaged in 1997 and we bought a house ($220k). My wife put down 22k for a down payment and we got a $198k loan.
In 1998 we got married.
In 2002 we refinanced the house and it appraised for $400k. The loan amount was paid down to $183,674 by that time and we added my name to the title. Originally we kept it off because my credit score would adversely affect our loan. By 2002 my credit score was in the 700's.
My wife's attorney is doing the following calculation:
$400,000 (refi apprasial)
-183,674 (which they say is my M/M amount)
________
$216,326 (she say's this is separate property amount), I think the marital community aquired a 9.63% of this amount.
In 2004 we sold the house for $520,000 a difference of $120k in appriciated value that each of us have a $60k interest in.
The same month we sold our house in 2004 we purchased our dream house for 760,000k.
In 2008 we sold the house for $779k and owed about $500k on the loan. After fee's the profit was 220k. I was thinking that amount would be split, but they're telling me I'm only entitled to $66,300.
Can this be??
If she put 22k down on our original house in 1997 and in 1998 we got married, and in 2004 we refinanced, isn't she only entitled to that amount which she solely contributed to? We both paid for the house and we both lived in it.
I have been reading Family Code 2640 and that appears to be what that section says. Please help!
There was also a section of the calculation, which was handwritten that said:
$216,326 (wife's s/p) minus my m/m amount (Oct 1998 thru Sept 2002)
half of the principal=15k divided by 2 = $7500 divided by $216,000=3.5%
at 3.5% the M/M amount =$6,300
House sold in 8/04 for $520,000 = 120,000 divided by 2= 60k
$216k minus 60k = 210k plus her 60k = $270k
We were married for 9 years and lived in our original house for 1 year before marriage. in that time period we both paid for the house and general expenses. In California, is this how the split is done or is she only entitled to her original down payment of 22k as family code 2640 implies.
Hi madeinohio!
If you are interested to know the community property interest you are entitled to, then you will have to calculate it by applying the Moore Marsden Rule.
In 2002 we refinanced the house and it appraised for $400k.
As you have mentioned that the property has been refinanced, there will be certain changes in the values of the parameters included in the Moore Marsden Rule. The new loan will be based on the value of the property during refinance. So, when you are calculating the community interest in refinanced property with the help of Moore Marsden Rule, you will have to replace the purchase price with the value of the property at the time of refinance.
In 2008 we sold the house for $779k and owed about $500k on the loan. After fee's the profit was 220k. I was thinking that amount would be split, but they're telling me I'm only entitled to $66,300.
Normally, the amount should be split equally. You can ask your wife lawyer to show you the calculation through which he is getting $66,300. It will be easier for you to understand the figures.
¦in 2004 we refinanced, isn't she only entitled to that amount which she solely contributed to? We both paid for the house and we both lived in it.
"
Yes, she is entitled to get the amount she has contributed to. But this amount will be calculated from the time both of you refinanced the property.
In California, is this how the split is done or is she only entitled to her original down payment of 22k as family code 2640 implies.
She will not be entitled to the down payment because you were not married at that time. Thus, the Moore Marsden Rule will not apply in this case.
Thanks.
If you are interested to know the community property interest you are entitled to, then you will have to calculate it by applying the Moore Marsden Rule.
In 2002 we refinanced the house and it appraised for $400k.
As you have mentioned that the property has been refinanced, there will be certain changes in the values of the parameters included in the Moore Marsden Rule. The new loan will be based on the value of the property during refinance. So, when you are calculating the community interest in refinanced property with the help of Moore Marsden Rule, you will have to replace the purchase price with the value of the property at the time of refinance.
In 2008 we sold the house for $779k and owed about $500k on the loan. After fee's the profit was 220k. I was thinking that amount would be split, but they're telling me I'm only entitled to $66,300.
Normally, the amount should be split equally. You can ask your wife lawyer to show you the calculation through which he is getting $66,300. It will be easier for you to understand the figures.
¦in 2004 we refinanced, isn't she only entitled to that amount which she solely contributed to? We both paid for the house and we both lived in it.
"
Yes, she is entitled to get the amount she has contributed to. But this amount will be calculated from the time both of you refinanced the property.
In California, is this how the split is done or is she only entitled to her original down payment of 22k as family code 2640 implies.
She will not be entitled to the down payment because you were not married at that time. Thus, the Moore Marsden Rule will not apply in this case.
Thanks.